Life insurance is about as simple as insurance gets. But there are still ways to get better value when you buy and save money on premiums. Here's how:
A range of insurance policies will pay some kind of benefit if your health suffers or you are unable to work. You can read about the different types here.
Life insurance is the cover that pays a specified sum if you die. Unlike other health related insurances, there are no criteria that need to be met when the insurer decides if you can claim: you are either dead or you're not.
That means that the policies on offer are, broadly speaking, the same and that buyers can hunt for the cheapest policy without having to compromise on the standard of cover. However, there are some important points to remember.
You can buy three types of life insurance - level term assurance, decreasing term assurance and whole-of-life insurance.
Level term assurance is taken out for a specified period of time - known as the term. The term is set according to the length of time the customer wants to be covered. They may base this on the period they expect their family to be financially dependent on them, or the term of their mortgage. The lump sum that level term assurance pays out remains the same throughout the term.
For decreasing term assurance the sum the insurance pays will fall over time. This is so that it can be bought in connection with a repayment mortgage where the amount the individual wants to cover gradually reduces in line with the debt. Because of this, decreasing term assurance is usually cheaper than level term assurance.
Whole-of-life insurance pays a guaranteed amount when you die and there is no specified term. However, the premiums for this type of insurance can change. A proportion of the premium you pay is invested and its growth helps keep the premiums low.
However, there have been reports of sharp increases in whole-of-life premiums.
These polices are often used as part of inheritance tax planning and you should consult a financial adviser before buying one.
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